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RBA poised to hold rate at 4.35% as inflation outlook cools
The Australian Dollar may swing around the decision and Governor Michele Bullock’s news conference as markets shift odds for future moves after softer CPI data.
FXStreet reports the Reserve Bank of Australia is expected to keep the Official Cash Rate steady at 4.35% for a second straight meeting, with the decision due at 04:30 GMT. The policy announcement will be paired with the Monetary Policy Statement and updated economic forecasts, followed by RBA Governor Michele Bullock’s press conference at 05:30 GMT.
Markets are projected to focus less on the widely expected hold and more on signals for the next policy step, after Australia’s inflation data pointed to slower underlying price pressures. FXStreet notes the RBA’s preferred Trimmed Mean CPI rose 0.8% quarter-on-quarter in Q2, versus expectations of 0.9%, and annual Trimmed Mean inflation edged up to 3.6% from 3.5%, still below the RBA’s 3.8% forecast.
Since the CPI release, Bloomberg data cited by FXStreet show the implied probability of an August rate hike has fallen sharply to 4%, from more than 20% prior to the data. Expectations for a fourth rate hike later this year also receded, with pricing falling below 50% compared with about 84% before the release.
FXStreet adds that the RBA’s outlook is complicated by shifting fuel and oil dynamics. While headline inflation benefited from lower fuel prices during June, oil prices moved higher after renewed conflict involving Iran in July, and Australia’s temporary fuel excise discount expired on August 2, potentially adding upside inflation risks ahead, which could keep the RBA tone cautious and data dependent.